1. Koch Industries, Inc. A CFO’s Perspective Wichita State University May 19, 2014 Confidential and proprietary information of Koch Industries, Inc. Do not copy without receipt of express written permission.

2. Agenda 1.Koch Overview 2.Innovation Matters 3.Market-Based Management ® 4.Prosperity, Freedom, and Well-Being 2

3. Koch Industries, Inc. - Overview Presence in nearly 60 countries; approximately 100,000 people worldwide. Koch is the 2nd largest private company in America, according to Forbes. 30% of Koch’s $115 billion in revenues are generated outside of the US. $60 billion in acquisition and capex in the last 10 years. 3

4. 4 Diverse Independent Companies Not Rated (AA-/Aa3) (A+/Baa2) (BB+/Baa3) (BBB/Baa3) Flint Hills Resources (AA-/A1) Petroleum Refining Chemicals & Lubricants Renewables Fertilizer Products Process Technology Commodity Trading Minerals Sourcing & Handling Pipelines Ranching Consumer Products Retail Commercial Packaging Medium Liner Boar d Pulp Building Products Plywood OSB Lumber Gypsum Intermediates Apparel Spandex Nylon Performance Surfaces & Materials Carpet Air bag Retail Commercial Not Rated Commercial Connectors Micro Connectors Integrated Products

5. Well Known Brand Names 5

6. Historic Growth Growth History Since 1960* Index of KI Book Value Growth Index of S&P 500 Growth 6

7. Source: http://money.cnn.com/magazines/fortune/fortune500/2012/full_list/ Koch would be #15 Fortune 500 Top 20 7

8. 8 The Power of Reinvestment and Good Decisions 5 Year15% IncrementsCompoundedYear 1 2001967 2 400 3 800 4 1,60050 5 3,200Years 6 6,400 7 12,800 8 25,600 9 51,200 10 102,4002017

9. Koch’s Presence in Kansas 3,400 direct employees, 7,080 total jobs supported ~$431 mm in direct compensation and benefits –~$25 mm in state income taxes annually –~$15 mm in state sales tax annually –~$15 mm in property taxes annually –~$15 mm in philanthropy annually 1.2 mm square foot office complex 20% additional square footage under construction 3 significant manufacturing sites in Kansas Future: potential for significant new investment which could double our presence in the next 10 years. 9

10. Why Innovation Matters? Sales and productivity gains Share and profit erosion Post office and the internet 10

11. Types of Innovation Product Function Logistics Processes Business models 11

12. Koch Examples Pet protect / Quilted Northern Ultra ® Renewable fuels Gas purchasing Methanol Plywood ADN catalyst Accounting / tax management Board governance Evolution of MBM 12

13. U.S. Manufacturing

14. Unit Labor Costs in Global FX Terms 14 Source: Bridgewater

15. Electricity Costs 15 Source: Bridgewater ($/mwH)

16. U.S. Share of Global Fixed Investment 16 Source: Bridgewater

17. Market-Based Management ®

18. We define MBM ® as a philosophy that enables organizations to succeed long term by applying the principles that allow free societies to prosper. Market-Based Management ® is a holistic approach to management that integrates theory and practice and prepares organizations to deal successfully with the challenges of growth and change. It draws on the disciplines of economics, ethics, social philosophy, psychology, sociology, biology, anthropology, management, epistemology and the philosophy of science. Market-Based Management ® also draws on the lessons learned from the successes and failures of humans to achieve peace, prosperity and societal progress. Thus, it includes the study of the history of economies, societies, cultures, politics, governments, conflicts, businesses, non- profits, science and technology. Market-Based Management ® 18

19. The 5 Dimensions of MBM ® Vision Virtues and Talent Knowledge Systems Decision Rights Incentives 19

20. MBM ® Guiding Principles Provide the Framework for Our Culture Integrity Compliance Value Creation Principled Entrepreneurship ™ Customer Focus Knowledge Change Humility Respect Fulfillment 20 Without these two you will not be allowed to stay in business.

21. Importance of Integrity, Compliance, and Culture? 21

22. Environment, Health and Safety Anti-Boycott Anti-Corruption (Foreign Corrupt Practices Act) Anti-Money Laundering Anti-Trust Commodity Trading (Dodd-Frank) Customs and Import Regulations Data Privacy Export Controls and Trade Sanctions Government Contracts and Interactions Intellectual Property Interstate Commerce Act Lacey Act Records and Information Management Securities and Equities Trading Venture Governance Employment Law Areas of Compliance 22

23. MBM ® Guiding Principles: Overview Integrity Compliance Value Creation Principled Entrepreneurship ™ Customer Focus Knowledge Change Humility Respect Fulfillment 23 This is the reason a business exists and what we are here for!

24. MBM ® Guiding Principles: Overview Integrity Compliance Value Creation Principled Entrepreneurship ™ Customer Focus Knowledge Change Humility Respect Fulfillment 24 How you make the first three a reality

25. Defending Our Freedom and Prosperity

26. Economic Freedom and Quality of Life 26

27. 27 Source: The Heritage Foundation/WSJ, 2014 Index of Economic Freedom – 2014 Ranking of Societies

28. Economic Freedom Measures Limited Government –Fiscal freedom, low government spending Rule of law –Private property rights, freedom from corruption Regulatory efficiency –Business and labor freedom, sound monetary policy Open markets –Free trade, investment and financial freedom 28

29. Economic Freedom and Prosperity Source: The Fraser Institute, 2007 29

30. Most Free vs. Least Free Countries... 8x higher average incomes per capita 10x higher incomes for the poor The most free country residents are happier Better civil rights Cleaner environment Longer life expectancy (20 years longer!) Less corruption Lower child labor and lower infant mortality Less unemployment Learn more: www.CharlesKochInstitute.org Facebook.com/EconomicFreedom 30

31. 31 Source: The Heritage Foundation/WSJ, 2014 Economic Freedom – 2014 vs. 2007 Ranking of Societies

32. Policies Proposed Today Ever increasing regulations and subsidies Large increases in taxes and spending Further deterioration in the rule of law Over-criminalization Increasing protectionism Socialization of health care Private property and civil rights violated Learn more: www.CharlesKochInstitute.org Facebook.com/EconomicFreedom 32